Business confidence up, demand gains strength: FICCI survey

The Overall Business Confidence Index (OBCI) rose to a six-quarter high and demand side in the economy is gradually gaining strength, a FICCI survey said on Wednesday.

The survey shows that the demand pulse is gradually gaining strength and good monsoon and 7th Pay Commission are major reasons

The index value stood at 67.3 in the current survey as against 62.8 in the last round.

“About 63 per cent of the respondents in the present survey described current economic conditions as ‘moderately to substantially better’ compared to last six months. Likewise, the corresponding numbers at the industry and firm levels were 63 per cent and 60 per cent, respectively,” a FICCI statement said.

The survey results also showed that the “demand pulse is gradually gaining strength, which is a welcome sign”. Good monsoon and award of the 7th Pay Commission will give further trigger to demand.

Still, in the current round, 46 per cent of the participants reported weak demand to be an impediment to their business performance. This was lower than 59 per cent respondents stating in a similar fashion in the previous round.

According to the survey, the respondents also indicated that there would be a pick-up in domestic demand over the period October 2016 to March 2017.

“Sixty-two per cent of the respondents said that they expect domestic demand to increase by up to 10 per cent over the next six months and about 16 per cent anticipated an increase of more than 10 per cent,” the survey said.

It also pointed out that the interest cost has been one of the major areas of worry for the industry and it remains critical.

“The Reserve Bank of India has cut the repo rate by 175 bps since January last year. The survey results show that on an average, the companies are paying an interest rate of about 12 per cent on working capital and term loans,” the statement said.

With regard to sales prospects, a majority of the respondents anticipated an improvement in performance over the next two quarters, while on the investment front, a marginal increase was noted in the proportion of respondents expecting an uptick in investments, the survey said.

“About 75 per cent of the participants said that they foresee a better performance at the economy level in near term. Further, 63 per cent of the respondents at the industry level and 70 per cent of the respondents at the firm level were hopeful of a better performance going ahead,” it added.